David v. Misamis Occidental II Electric Cooperative
REITERATIONFacts
The Antecedents: Virgilio S. David (David), engaged in supplying electrical hardware, agreed to supply Misamis Occidental II Electric Cooperative, Inc. (MOELCI) with a 10 MVA power transformer for P5,200,000.00, with a 50% downpayment and the balance upon delivery. MOELCI’s representatives, Engr. Reynaldo Rada and Director Jose Jimenez, signed a "conforme" on David's proposal. Due to delays in MOELCI's loan from the National Electrification Administration (NEA), David agreed to deliver the transformer without the downpayment, provided MOELCI paid 24% annual interest. The goods were shipped on December 17, 1992. MOELCI subsequently released the goods from the shipping company, paying arrastre charges. Despite demand letters and statements of account, MOELCI failed to pay. Procedural History: David filed a complaint for specific performance with damages. MOELCI moved for dismissal, arguing lack of cause of action and unenforceability under the Statute of Frauds, claiming the proposal was not a binding contract. The Regional Trial Court (RTC) denied MOELCI's motion for preliminary hearing. After MOELCI's failure to appear, David presented evidence ex parte. The RTC dismissed the complaint, finding the contract of sale was perfected but not consummated due to lack of proven delivery and receipt. The Court of Appeals (CA) affirmed the RTC, holding that the "quotation letter" was at best a contract to sell and lacked textual support to be considered a contract of sale. The Petition: David filed a petition for review on certiorari, questioning whether a perfected contract of sale existed and whether there was delivery that consummated the contract.
Issue(s)
Whether or not there was a perfected contract of sale. Whether or not there was a delivery that consummated the contract.
Ruling
The petition is GRANTED. The July 8, 2010 Decision of the Court of Appeals is REVERSED and SET ASIDE. Respondent Misamis Occidental II Electric Cooperative, Inc. is ordered to pay petitioner Virgilio S. David the total sum of P5,472,722.27 with interest at the rate of 12% per annum reckoned from the filing of the complaint until fully paid.
Ratio Decidendi
On the issue of whether or not there was a perfected contract of sale: The Court held that a perfected contract of sale existed. The elements of a contract of sale are consent, determinate subject matter, and price certain in money or its equivalent. In this case, the "conforme" signatures of MOELCI's representatives on David's proposal, despite its appearance as a quotation, signified their agreement to the terms and conditions for the purchase of the transformer. The issuance of a board resolution authorizing the purchase, the multiple meetings to discuss terms, and MOELCI's request to deliver the unit without downpayment due to loan delays further bolstered the existence of consent or meeting of the minds. The subject matter (10 MVA Power Transformer with accessories) and the price (P5,200,000.00 for the transformer and P2,169,500.00 for accessories) were also determinate and certain, respectively. Therefore, the document was not merely a contract to sell but a perfected contract of sale. On the issue of whether or not there was a delivery that consummated the contract: The Court ruled that there was delivery and release of the goods. Article 1523 of the Civil Code states that delivery to a carrier for transmission to the buyer is deemed delivery to the buyer, unless a contrary intent appears. David was authorized by the agreement to send the goods to MOELCI, and the delivery to William Lines, Inc., evidenced by the Bill of Lading, constituted delivery to MOELCI. The stipulation that freight, handling, insurance, and customs duties were for MOELCI's account further supported the intention that title transferred upon shipment. MOELCI failed to present evidence to overcome the presumption under Article 1523. The release of the goods from the shipping company, evidenced by a "Released" stamp on the Bill of Lading and payment of arrastre charges, confirmed actual receipt. This partial performance also took the transaction out of the Statute of Frauds. The Court found the stipulated 24% interest rate unconscionable and reduced it to 12% per annum, while denying the claim for attorney's fees and the balance of other purchases for being unsubstantiated.
Main Doctrine
Delivery of goods to a carrier for transmission to the buyer, in pursuance of a contract of sale where the seller is authorized or required to send the goods, is deemed delivery to the buyer, unless a contrary intent appears. The buyer bears the burden of proving that Article 1523 of the Civil Code is not applicable.